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Slowly Rising Wages - 3/24/15

Here’s the economy mystery of the day – why are wages still rising so slowly when job growth has become so formidable and the unemployment rate continues to trend lower.  The two hundred and ninety five thousand jobs that the government estimates the nation added last month was easily above expectations. 

As pointed out by writer Neil Irwin, the past year of job growth represents the best performance in nearly fifteen years.  Despite that, average hourly earnings rose only zero point one percent in February, below forecasts.  Over the past year, average hourly earnings have expanded by only one point nine eight percent, a pace that has actually slowed relative to a few months ago. 

Because inflation is so low, the roughly two percent growth in average hourly earnings is actually translating into real spending growth, but if gasoline and other prices begin to recover meaningfully, that growth could be quickly diminished.  With the nation’s unemployment rate falling to five point five percent last month, many economists continue to predict faster wage growth later this year.  But it hasn’t happened yet.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.